In-House IT Department or a Dedicated Team: What’s the Smarter Investment?

Despite waves of layoffs across the tech industry, the global shortage of skilled IT professionals remains a major challenge. According to Deloitte’s latest survey, 66% of executives report that most recent hires lack the experience and readiness needed to perform effectively. This mismatch between supply and demand hinders digital transformation initiatives across industries.

At the same time, many companies are shifting their strategic priorities. Rather than relying solely on in-house hiring, 80% of executives now plan to maintain or increase their investment in outsourcing. While cost savings were once the main driver, today’s businesses are turning to external development models to gain agility, close skill gaps, and accelerate development speed.

So, which approach delivers more value — building an in-house IT department or partnering with a dedicated development team? Each has distinct benefits and challenges, so it’s essential to understand how they vary before choosing what’s right for your company’s needs.

In this article, we’ll explore the key differences between an in-house IT department and a dedicated development team, from hiring and infrastructure costs to performance, scalability, and long-term ROI, to help you make a smarter decision.

Both an in-house IT department and a dedicated team can cover your software development and IT needs, but they function in fundamentally different ways. Before diving into a detailed comparison, let’s explore the core structure and characteristics of each model.

An in-house IT team consists of full-time employees who work directly for your company. These professionals handle various IT functions, including software development, infrastructure management, security, maintenance and technical support.

Traditionally, in-house IT teams worked from company offices, but the rise of remote work has changed this dynamic. Today, developers don’t necessarily need to be on-site to manage operations. In fact, 36% of white-collar workers, who include IT professionals, prefer remote work, while 58% state they want to work from home at least three days a week.

This shift further blurs the line between having an in-house IT department and hiring an external dedicated software development team, as remote collaboration tools and cloud-based platforms make both models increasingly flexible.

A dedicated development team consists of IT professionals provided by an external vendor, usually a software development company, who work exclusively on your company’s projects. Unlike an in-house team, dedicated team members are not your direct employees. Instead, they are third-party contractors. However, unlike freelancers, who typically handle specific tasks, a dedicated team works on an entire project from start to finish and integrates with your company’s workflows.

Dedicated teams are typically cross-functional, meaning they consist of professionals with diverse skills (e.g., solution architects, front-end and back-end developers, UI/UX designers, etc). They can act as your primary development team or function as an extension to your in-house staff.

One key advantage is that a software development vendor takes on much of the responsibility for team formation, talent management, onboarding, and operational support. This helps you save much time and effort while ensuring access to experts with the right skills.

Dedicated teams often work remotely and rely on agile methodologies, cloud-based tools, and real-time collaboration platforms such as Jira, Trello, Slack, and Microsoft Teams. McKinsey research suggests that fully remote companies can outperform traditional in-person teams when they implement the right operational models.

To fully understand the differences between in-house vs. dedicated teams, we compared these two models in terms of the hiring process, upfront and long-term expenses, communication, management, performance, and scalability.

Finding and retaining skilled tech talent is a growing challenge for companies regardless of their development model. According to a 2023 Deloitte survey, nearly 90% of tech leaders still struggle with recruiting and retaining skilled professionals even amid widespread layoffs. Roles such as system architects, AI/ML engineers, and cloud experts remain especially hard to fill due to their high specialization and global demand.

An internal McKinsey survey states that only 16% of executives feel confident they have enough tech talent to support digital transformation. However, 60% of companies cite talent scarcity as a top barrier to progress.

In-house hiring is often limited by geography and slow recruitment cycles. As a result, outsourcing delivery models have matured, with a growing focus on value-based relationships like hiring dedicated software development teams. Deloitte states that despite the growth of insourcing, 40% of organizations plan to increase their investment in third-party outsourcing. One of the reasons for this growth is that outsourcing vendors can assemble cross-functional teams tailored to your needs quicker to help you eliminate skill gaps.

Recruiting IT talent is a time-consuming and expensive process, particularly for in-house teams. You should invest in sourcing, interviewing, onboarding, and training employees. The demand for skilled software engineers, particularly data science, cloud, and cybersecurity experts, has made hiring even more competitive.

If you want to hire an in-house staff, you should take into account that internal HR teams or recruitment agencies often charge 15-25% of an employee’s annual salary. On top of compensation costs you pay to your hire, you’ll also need to cover bonuses, payroll taxes, insurance, sick leaves, and other fees. So, in fact, the true employment cost will be 1,25-1,4 times higher than your employee’s salary.

A dedicated team eliminates recruitment expenses since vendors charge you contract-based fees — fixed monthly rates for IT professionals based on skill level, experience, and project scope. The outsourcing provider is responsible for hiring and onboarding team members, so you won’t have a hiring headache.

Maintaining an in-house IT department involves significant fixed expenses. For instance, a senior .NET developer in the US earns around $143K+ per year, plus benefits such as health insurance, 401(k) contributions, and paid sick leave. Beyond salaries, companies must invest in continuous training to keep employees updated on emerging technologies, security practices, and compliance standards.

While these investments help retain talent and strengthen employee loyalty, they don’t eliminate turnover completely. IT professionals typically stay in a job for only 2–3 years, so you would need to incur costs to replace and train new hires.

Cost savings were once the primary driver of outsourcing, with 70% of organizations citing it as the main reason in 2020. However, by 2024, that number has dropped to 34%, according to a Deloitte Outsourcing Survey. Instead, companies now prioritize improved access to specialized expertise and agility in addition to cost-cutting.

While rates vary depending on the vendor’s location and expertise, outsourcing to Eastern European countries like Ukraine or Poland can cut labor expenses by 30–50% compared to hiring in-house in Western countries (based on a comparison of average developer salaries in the CEE region). Since training and certifications are handled by the outsourcing provider, businesses don’t have to allocate additional budgets for upskilling. As a result, a well-structured dedicated team can deliver higher ROI than an in-house department.

Running an in-house IT department requires considerable investment in infrastructure and daily operations. You should provide office space, furniture, computers, servers, networking hardware, and secure development environments. Additionally, you should cover licenses for development tools, software, collaboration platforms, and security solutions (like firewalls, VPNs, endpoint protection, and monitoring systems).

If your team manages cloud infrastructure internally, you can also expect recurring expenses for storage, compute, load balancing, and CI/CD pipeline tools like Jenkins, GitLab, or Docker. On top of all of that, you’ll also need to pay overhead costs tied to maintaining an on-site workforce, including utilities, office maintenance, and administrative staff. These costs can significantly strain IT budgets, especially as teams grow.

A dedicated team model greatly reduces these expenses. Since dedicated teams typically work remotely using their own or vendor-provided infrastructure, your company doesn’t need to invest in office space or equipment. According to Global Workplace Analytics, businesses can save over $11,000 per year for each half-time remote worker, and that figure grows for fully remote IT teams.

Outsourcing vendors are also responsible for maintaining secure environments and ensuring compliance with standards like ISO 27001, SOC 2, CCPA, or GDPR, as well as providing the technical tools required for development. This allows you to focus your budget on outcomes rather than infrastructure overhead.

With an in-house IT team, scaling up means hiring new full-time employees. This process can take weeks or even months due to competitive talent markets and lengthy recruitment cycles. You’ll also need to provide your new hires with additional equipment and licenses, and potentially expand office space (if your team members are working from the office). This may slow down your ability to respond to market needs and also increase fixed costs. Scaling down can be equally costly, as it may often involve severance packages or internal restructuring.

In contrast, dedicated engineering teams offer far greater flexibility. Vendors can quickly add or remove developers, UI/UX designers, QA specialists, or other roles based on project demands. However, sometimes you would need to wait for them to hire someone for a specific role. Anyway, the provided elasticity allows you to scale a team within days or weeks without the burden of long-term commitments or overhead costs.

In terms of day-to-day development, both in-house teams and dedicated development teams can deliver similar speed and efficiency. However, the difference becomes clear when you need to accelerate delivery or meet tight deadlines.

With an in-house team, scaling up quickly can be difficult due to hiring delays, onboarding, and internal approval processes. Adding more developers or specialists may take weeks or months.

Dedicated team services offer greater flexibility in this regard. Very often, software development vendors can allocate additional engineers quickly. This makes it easier to scale up resources and parallelize development tasks to meet critical deadlines.

Managing an in-house IT department requires full control over recruitment, training, performance monitoring, and day-to-day supervision. You’re responsible for assembling the team, ensuring ongoing skills development, allocating infrastructure and tools, and handling HR-related tasks like payroll, benefits, and retention strategies. While this model gives you direct oversight and alignment with internal workflows, it also demands significant time, effort, and budget dedicated to operational and administrative management.

In contrast, a dedicated team provided by an outsourcing partner shifts much of the managerial burden to the vendor. The external provider is responsible for sourcing, onboarding, and supervising team members and ensuring their consistent productivity and quality of work.

While client-side involvement, such as interviewing candidates or participating in onboarding, is often part of the process to ensure alignment with internal expectations, it’s significantly less time- and resource-intensive compared to managing an in-house team.

These teams come with pre-established workflows, tools, and experienced project managers who oversee daily operations and report progress. Moreover, vendors like Leobit focus on knowledge continuity and long-term cooperation, which reduces the risk of productivity loss due to turnover or shifting priorities.

When you hire an in-house IT team, establishing control and smooth communication between team members and across departments becomes your tactical responsibility. You must ensure that team members fit into the company culture, work well together, and align with company values.

However, as the employer, you should choose the right collaboration tools and create internal processes to maintain clear, efficient communication. Additionally, you are responsible for monitoring the team’s progress and performance and resolving any conflicts that arise. This task can be time-consuming, especially if you have distributed team members or your team grows.

Outsourcing vendors often provide dedicated project managers or team leaders to act as a communication bridge, manage the team internally, and keep you informed of progress. You maintain oversight of the project, but you don’t need to micromanage every developer. Vendors use collaboration tools like Slack, Jira, and Zoom to help you control and track progress. Regular stand-ups, sprint reviews, and transparent reporting ensure that you have real-time insight into the project’s status.

The table below provides a high-level comparison of the key aspects of having in-house IT departments vs. outsourcing software development to a dedicated team.

Choosing between an in-house IT department and a dedicated development team is rarely straightforward. Each model has its own advantages and limitations that can significantly impact your development speed, resource planning, and long-term strategy.

The answer isn’t always black and white—several crucial factors influence the right choice.

Hiring an in-house software development team is best suited for companies with long-term, product-focused goals.

Below are the key scenarios when investing in an internal team can make the most sense:

• You want to build a strong corporate culture. 92% of employees across generations believe that corporate culture impacts their decision to stay with an employer. When you build an in-house development team, you’re not just hiring for skills, but investing in a team that understands your company’s mission and internal dynamics. Developers become immersed in your way of thinking, communication style, and product philosophy.
• You require full-time, ongoing development and seamless cross-department collaboration. If your development efforts are continuous and require different teams to work together, having on-site in-house developers may be easier to coordinate. In-house teams can communicate in real time with marketing, sales, and support teams, which may enable faster feedback loops and feature refinement.
• You plan to deliver multiple products or build a long-term IT infrastructure. If your business roadmap includes several interconnected projects, establishing a stable in-house IT department ensures continuity, knowledge retention, and a cohesive development strategy over time.

In a nutshell, building an in-house development team is ideal for companies with ongoing development needs and a strong focus on internal culture. It allows for tighter cross-team collaboration, real-time communication, and deeper alignment with your company’s long-term mission and values.

Engaging a dedicated IT team becomes a strategic advantage in scenarios where rapid scaling, specialized expertise, and cost efficiency are paramount.

Consider partnering with a dedicated team when:

• You need to accelerate development without growing the internal headcount. When project timelines are tight and there’s a need to expedite development processes without the complexities of internal hiring, dedicated teams offer an effective solution. They provide the agility to swiftly augment your workforce.
• You lack in-house expertise in specific technologies or domains. Roles requiring niche skills in areas like artificial intelligence, machine learning, cloud technologies, or cybersecurity can be challenging to fill internally. By engaging dedicated teams, you can bridge the tech talent gap quicker and, potentially, at more affordable rates.
• You need to test new ideas or scale quickly. Dedicated teams provide the flexibility to explore innovative ideas or expand capacity without the constraints of permanent employment contracts. This adaptability is crucial for organizations aiming to remain agile and responsive to market demands. For instance, for MVP development or market validation projects, dedicated teams offer a low-risk path to move quickly without long-term hiring obligations.
• You want to focus internal resources on core business strategies. By delegating development tasks to dedicated teams, internal staff can concentrate on strategic initiatives and customer engagement. This division of labor enhances overall productivity and ensures that critical business areas receive the attention they require.

In summary, hiring a dedicated development team is the right move when speed, flexibility, and access to specialized skills are essential. It allows companies to scale fast, test ideas with minimal risk, and fill talent gaps without permanent employment. By offloading technical execution, internal teams can stay focused on core business priorities and strategic growth.

As remote work becomes the standard, the distinction between in-house and dedicated development teams continues to blur. Both models can meet your technical needs, but the dedicated team model stands out for its efficiency. It takes over recruitment, HR management, and infrastructure and provides you with ready-to-go expertise without the overhead.

On the other hand, in-house teams offer deeper integration into your company culture and long-term alignment with internal processes. However, this comes with higher operational costs, including salaries, benefits, office space, equipment, and continuous training.

So, the smarter investment depends on your goals. For companies focused on building internal expertise and long-term cohesion, investing in an in-house team makes strategic sense. But if you value flexibility, rapid scaling, and cost efficiency, a dedicated development team may be the optimal choice.

Leobit has over 10 years of experience providing dedicated development team services to companies across the globe. With delivery centers in Ukraine and Poland, we offer an ideal solution for establishing a European R&D hub by providing access to top-tier talent and seamless cross-border collaboration. Our dedicated teams have successfully delivered over 150 projects, helping our customers accelerate development and bring innovative ideas.

Here’s what our customers say about our dedicated team services.

Contact us today to discuss how Leobit can help you build a high-performing, scalable, dedicated development team tailored to your business goals.